Today, Frequency Forward, a public interest watchdog and advocacy group and member Randy Bryce of Caledonia, Wisconsin filed a legal petition at the Federal Communications Commission (FCC) to deny the license transfer applications of five TV station licenses held by Sinclair Broadcasting, founded and operated by David D. Smith.
This legal Petition “alleges that Sinclair lacks the requisite character to hold FCC licenses.” It cites Sinclair Broadcasting’s formation of shell corporations, principally Cunningham Broadcasting and Deerfield Media, Inc. to skirt federal law (allowing one broadcaster to reach no more than 39% of the national TV viewing public and FCC rules prohibiting one broadcaster from licensing or controlling more than two TV stations in a single TV viewing market without prior FCC approval.)
Frequency Forward attorney Art Belendiuk says, “Frequency Forward has demonstrated that Sinclair Broadcasting controls more television stations than permitted by the FCC rules. Sinclair has worked to actively conceal the full extent of its control over these stations, making repeated misrepresentations to the FCC and statements that lack candor. It has gone so far as to make material misrepresentations to questions asked in the course of the FCC’s investigation into the extent of its control over these front companies.”
The FCC requires broadcasters are to be of good character to qualify to hold a license to broadcast to the public. The Commission brought this character issue to the forefront in 2017 when then Republican FCC Chair Ajit Pai found misrepresentations by Sinclair on the proposed $3.9 billion merger for Sinclair to acquire broadcast licenses held by Tribune Broadcasting. An approved merger would have resulted in Sinclair having operational control over stations available in 72 percent of all households with a TV set in the United States. FCC Chair Pai called for a Hearing Designation Order based on those representations.
From today’s Petition:
Before the HDO was issued Sinclair withdrew the Cunningham and Fader applications. Nonetheless, the Commission concluded: “that material questions remain because the real party in interest issue in this case includes a potential element of misrepresentation or lack of candor that may suggest granting other, related applications by the same party would not be in the public interest.”
In reviewing the proposed transfers, the Commission concluded: “The record raises significant questions as to whether those proposed divestitures were in fact ‘sham’ transactions.”
Although the deal was scuttled, the presiding Judge, in terminating the hearing, made it clear these character issues would need to be litigated in a future proceeding:
That is not to say that Sinclair’s alleged misconduct is nullified or excused by the cancellation of its proposed deal with Tribune. Certainly, the behavior of a multiple-station owner before the Commission “may be so fundamental to a licensee’s operation that it is relevant to its qualifications to hold any station license.”
That broad inquiry, however, would be more appropriately considered in the context of a future proceeding in which Sinclair is seeking Commission approval, for example, involving an application for a license assignment, transfer, or renewal. At that time, it may be determined that an examination of the misrepresentation and/or lack of candor allegations raised in this proceeding is warranted as part of a more general assessment of Sinclair’s basic character qualifications to be a Commission licensee.
This proposed transfer from of licenses from Sinclair to Rincon Broadcasting provides the opportunity for the FCC to thoroughly examine these issues per its own Administrative Law Judge Jane Halprin’s demand.
The Petition details a shell game Sinclair has played over decades to skirt the law and FCC rules. It states the Smith family came up with a scheme to form broadcasting companies Deerfield Media and Cunningham Broadcasting, hire and control the supposed CEO’s of those companies, and then operate those TV Stations licensed by Deerfield and Cunningham through fraudulent Joint Sales Agreements (JSAs), Shared Service Agreements (SSA’s), and Local Marketing Agreements (LMAs).
The Petition brings up many examples of the Smith family’s machinations to hide the family’s real interest in multiple broadcast stations they legally could not control. For example, upon the Smith family matriarch’s death, Cunningham Broadcasting’s former banker Michael Anderson became the successor trustee to Carolyn Smith; Anderson later acquired all the voting shares of Cunningham. But
The nonvoting shares continue to be held by trusts for the benefit of Carolyn Smith’s grandchildren. Each of Carolyn Smith’s four sons holds an option to acquire the voting shares of Cunningham.
Similarly, in the scuttled Tribune merger which rose eyebrows at the FCC for including a proposed sale of Superstation WGN to Sinclair for a mere $60 million,
The sale of WGN also came with an option agreement, giving Sinclair the opportunity to buy the station back at the same price anytime within the next 48 years.
The Petition also cites the fact that the same attorneys represent Sinclair, Cunningham and Deerfield.
Thomas & Libowitz, P.A. is Sinclair’s corporate law firm and represents the three companies on many of their corporate filings. Pillsbury, Winthrop, Shaw, Pittman, LLP represents Sinclair, Cunningham and Deerfield, as FCC counsel. Pillsbury’s name appears on numerous FCC filings on behalf of these companies. A lawyer cannot represent multiple clients in the same matter if there is or likely to be a conflict of interest.”
The results of an October 28, 2020 Freedom of Information Act request by this author seeking the FCC Media Bureau’s four HDO Investigation documents it used in determining that Sinclair should not go through a hearing are referenced in detail.
Categorically, the HDO Investigation documents do not support the Bureau’s claim that Sinclair acted in good faith. On the contrary, they support the Commission’s initial conclusion that Sinclair is in de facto control of Cunningham and other Sinclair operated front companies. In fact, they provide further evidence that Sinclair was willing to dissemble to maintain it control over the front companies.
…A review of the FOIA documents makes it clear that Sinclair was neither honest nor forthcoming with the Bureau’s investigation of the designated misrepresentation and real party in interest issues. Sinclair’s responses to the LOI add another layer of deceit to its growing list of false statements, concealments and misrepresentations.
The FCC Media Bureau scuttled Chair Pai’s hearing and instead imposed a Consent Decree and fine of $48 million on Sinclair (included the unpaid 2017 $13.4 million fine imposed on the broadcaster for masquerading advertising content as news.)
The Media Bureau had no authority to issue the Consent Decree. The real party in interest and misrepresentation issues remain unresolved before the FCC. Accordingly, the FCC should designate the referenced applications for hearing to resolve the substantial and material questions of fact whether Sinclair is in de facto control of Cunningham, Deerfield and its other front companies and whether Sinclair has the requisite character qualifications to remain a Commission licensee. Petitioner maintains that the evidence clearly shows that it does not.
The license transfers being challenged are Sinclair KHQA Hannibal MO, KTVO Kirksville, MO, WICS Springfield, IL, WICD-TV Champlain, IL, and WVTV Milwaukee, WI. The licenses are proposed to be transferred to Rincon Broadcasting Group LLC. Rincon is principally owned by Todd Parkin, who formerly served as Vice President of Ad Sales and Strategy for Sinclair’s Bally Sports networks.
In a press release from Frequency Forward, attorney Belendiuk states, “These companies are not independent broadcasters; they’re fronts for Sinclair. Chairman Brendan Carr has said he’s committed to treating all broadcast licensing matters fairly and balanced, and we hope he approaches this case with the same urgency and determination he’s shown in his first months as Chair.”
